Brexit Briefing No.7

A German election result no one predicted, a French President setting out a Napoleonic grand vision for European reform and another formal round of Brexit negotiations between David Davis and Michel Barnier. This was a week which may shape the future direction of the EU and Brexit.

This week started with the fallout from the German election result which offered only one viable government coalition consisting of Angela Merkel’s CDU, the Bavarian CSU, the Liberal FDP and the Green Party.

However the negotiations to form that government will take a long time, probably until the end of the year and even after it is in place it will be a weak government, as the four parties represented have significant policy differences on most issues.

Angela Merkel will therefore no longer have the stability at home to be able to drive the agenda in Europe in the same way that she has for the last decade and this may impact on the Brexit negotiations. Added to that her CDU/CSU alliance lost almost a quarter of their votes from 2013 so she leaves the election a significantly weakened figure.

German Bundestag

Emmanuel Macron, the French President may therefore begin to play a more muscular European role and he began this week with a speech outlining his future for Europe, a typically French one which included far more Europe, including common EU tax rates and an EU rapid defence force.

The speech was originally intended to be launched in the wake of another comfortable Merkel victory, his ability to achieve much of this reform without a strong head of government in Berlin is questionable.

Behind this background the fourth round of Brexit negotiations took place in Brussels in the shadow of Prime Minister Theresa May’s speech in Florence last week.

Whilst the EU acknowledged that the speech had changed the dynamics it wasn’t enough for the EU to move onto the trade agreement phase of negotiations, with Michel Barnier hinting it could be some months before that was possible from his point of view.

Instead negotiations focused yet again on citizens' rights, Ireland and the budget issues. It was on citizens' rights on which the most progress was made

In his press conference on Thursday Mr Barnier said the UK had confirmed that EU citizens living in the UK would be able to invoke their rights before British courts, and that the UK will ensure the withdrawal agreement is referenced in UK law.

There remains a significant stumbling block for both sides on the role of the European Court of Justice in monitoring the rights of EU citizens in the UK.

In the UK government's eyes this presents two problems. Firstly, it continues the jurisdiction of the ECJ in the UK, a red line for the government. Secondly, it in fact creates a new, higher class of citizen with greater rights than UK citizens in their own country.

This is most problematic in the area of family reunification, where EU citizens in the UK already have more rights than UK citizens to bring spouses and extended family members into the UK. UK citizens with non EU spouses have to meet strict financial criteria before they can bring their spouse to the UK. However a Spanish, French or German citizen in the UK can bring their non EU spouse to the UK without meeting those criteria as those rights are guaranteed by EU law. The EU wants these preferential rights to continue post-Brexit, but this is not acceptable to the UK.

ECJ

It has also emerged that the British government has called on the EU to guarantee onward movement rights for the 1 million British citizens living in the EU, meaning for example, that a British national living in Spain could move to any other EU country after Brexit. In return the UK government has offered the 3.5 million EU nationals currently in the UK an indefinite right of return if they ever moved abroad. The EU has yet to formally respond to the British offer.

On finances there is still a divide to be bridged, in spite of the Prime Minister's speech in Florence last week.

As outlined in the Prime Minister's speech, the UK has offered to honour its commitments until the end of the current EU financial framework, essentially for the two year transition period after the UK leaves the EU.

Mr Barnier today implied that the EU would need much more: "For the EU, the only way to reach sufficient progress is that all commitments taken at 28 [member states] are honoured at 28". Taken at face value such remarks could indicate the EU expects Britain to continue paying in for many decades to come, even outside of the issue of pensions liabilities. Such a demand would be difficult for any British government to agree to.

On Ireland there was little detail of progress, but it features in a controversial leaked draft European Parliament resolution on Brexit to be voted next week in Strasbourg. More on that after the vote.

So, despite both sides hailing the new dynamic created by the Prime Minister's speech, concrete progress at this round of negotiations was limited and we are still a long way away from even beginning discussions on the post-Brexit trading arrangements.